SIGA-AN VS VILLANUEVA

SIGA-AN VS VILLANUEVA

G.R. No. 173227  January 20, 2009

SEBASTIAN SIGA-AN, Petitioner, 
ALICIA VILLANUEVA, Respondent.

Nature: Petition for Review on Certiorari under Rule 45

Keywords: Loan, not in writing, no stipulation of interest

Summary: Respondent filed a complaint for sum of money against petitioner. Respondent claimed that petitioner approached her inside the PNO and offered to loan her the amount of P540,000.00 of which the loan agreement was not reduced in writing and there was no stipulation as to the payment of interest for the loan. Respondent issued a check worth P500,000.00 to petitioner as partial payment of the loan.  She then issued another check in the amount of P200,000.00 to petitioner as payment of the remaining balance of the loan of which the excess amount of P160,000.00 would be applied as interest for the loan.  Not satisfied with the amount applied as interest, petitioner pestered her to pay additional interest and threatened to block or disapprove her transactions with the PNO if she would not comply with his demand. Thus, she paid additional amounts in cash and checks as interests for the loan.  She asked petitioner for receipt for the payments but was told that it was not necessary as there was mutual trust and confidence between them. According to her computation, the total amount she paid to petitioner for the loan and interest accumulated to P1,200,000.00.

The RTC rendered a Decision holding that respondent made an overpayment of her loan obligation to petitioner and that the latter should refund the excess amount to the former.  It ratiocinated that respondent’s obligation was only to pay the loaned amount of P540,000.00, and that the alleged interests due should not be included in the computation of respondent’s total monetary debt because there was no agreement between them regarding payment of interest.  It concluded that since respondent made an excess payment to petitioner in the amount of P660,000.00 through mistake, petitioner should return the said amount to respondent pursuant to the principle of solutio indebiti. Also, petitioner should pay moral damages for the sleepless nights and wounded feelings experienced by respondent.  Further, petitioner should pay exemplary damages by way of example or correction for the public good, plus attorney’s fees and costs of suit.

CHICO-NAZARIO, J.

Facts:

On 30 March 1998, respondent Alicia Villanueva filed a complaint⁵ for sum of money against petitioner Sebastian Siga-an before the Las Pinas City Regional Trial Court. Respondent alleged that she was a businesswoman engaged in supplying office materials and equipments to the Philippine Navy Office (PNO), while petitioner was a military officer and comptroller of the PNO from 1991 to 1996.

Villanueva claimed that sometime in 1992, petitioner Siga-an approached her inside the PNO and offered to loan her the amount of ₱540,000.00. Since she needed capital for her business transactions with the PNO, she accepted petitioner’s proposal. The loan agreement was not reduced in writing. Also, there was no stipulation as to the payment of interest for the loan.

On 31 August 1993, respondent issued a check worth ₱500,000.00 to petitioner as partial payment of the loan. On 31 October 1993, she issued another check in the amount of ₱200,000.00 to petitioner as payment of the remaining balance of the loan. Petitioner told her that since she paid a total amount of ₱700,000.00 for the ₱540,000.00 worth of loan, the excess amount of ₱160,000.00 would be applied as interest for the loan.

Not satisfied with the amount applied as interest, petitioner pestered her to pay additional interest. Petitioner threatened to block or disapprove her transactions with the PNO if she would not comply with his demand. As all her transactions with the PNO were subject to the approval of petitioner as comptroller of the PNO, and fearing that petitioner might block or unduly influence the payment of her vouchers in the PNO, she conceded. Thus, she paid additional amounts in cash and checks as interests for the loan. She asked petitioner for receipt for the payments but petitioner told her that it was not necessary as there was mutual trust and confidence between them. According to her computation, the total amount she paid to petitioner for the loan and interest accumulated to ₱1,200,000.00.⁷

Thereafter, respondent consulted a lawyer regarding the propriety of paying interest on the loan despite absence of agreement to that effect. Her lawyer told her that petitioner could not validly collect interest on the loan because there was no agreement between her and petitioner regarding payment of interest. Since she paid petitioner a total amount of ₱1,200,000.00 for the ₱540,000.00 worth of loan, and upon being advised by her lawyer that she made overpayment to petitioner, she sent a demand letter to petitioner asking for the return of the excess amount of ₱660,000.00. Petitioner, despite receipt of the demand letter, ignored her claim for reimbursement.

Respondent prayed that the RTC render judgment ordering petitioner to pay respondent (1) ₱660,000.00 plus legal interest from the time of demand; (2) ₱300,000.00 as moral damages; (3) ₱50,000.00 as exemplary damages; and (4) an amount equivalent to 25% of ₱660,000.00 as attorney’s fees.

Petitioner insisted that there was no overpayment because respondent admitted in the latter’s promissory note that her monetary obligation as of 12 September 1994 amounted to ₱1,240,000.00 inclusive of interests. He argued that respondent was already estopped from complaining that she should not have paid any interest, because she was given several times to settle her obligation but failed to do so. He maintained that to rule in favor of respondent is tantamount to concluding that the loan was given interest-free. Based on the foregoing averments, he asked the RTC to dismiss respondent’s complaint.

Issue:

1. Whether or not interest was due to petitioner;  (

2. Whether the principle of solutio indebiti applies to the case at bar.

Held: (1) No. Compensatory interest is not chargeable in the instant case because it was not duly proven that respondent defaulted in paying the loan and no interest was due on the loan because there was no written agreement as regards payment of interest. Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates that no interest shall be due unless it has been expressly stipulated in writing.  As can be gleaned from the foregoing provision, payment of monetary interest is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for the payment of interest was reduced in writing.  The concurrence of the two conditions is required for the payment of monetary interest.  Thus, we have held that collection of interest without any stipulation therefor in writing is prohibited by law.  

(2) Petitioner cannot be compelled to return the alleged excess amount paid by respondent as interest. Under Article 1960 of the Civil Code, if the borrower of loan pays interest when there has been no stipulation therefor, the provisions of the Civil Code concerning solutio indebiti shall be applied.  Article 2154 of the Civil Code explains the principle of solutio indebiti.  Said provision provides that if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.  In such a case, a creditor-debtor relationship is created under a quasi-contract whereby the payor becomes the creditor who then has the right to demand the return of payment made by mistake, and the person who has no right to receive such payment becomes obligated to return the same.  The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of another.  The principle of solutio indebiti applies where (1) a payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment; and (2) the payment is made through mistake, and not through liberality or some other cause.  We have held that the principle of solutio indebiti applies in case of erroneous payment of undue interest. 

Article 2232 of the Civil Code states that in a quasi-contract, such as solutio indebiti, exemplary damages may be imposed if the defendant acted in an oppressive manner.  Petitioner acted oppressively when he pestered respondent to pay interest and threatened to block her transactions with the PNO if she would not pay interest.  This forced respondent to pay interest despite lack of agreement thereto.  Thus, the award of exemplary damages is appropriate so as to deter petitioner and other lenders from committing similar and other serious wrongdoings.

Ruling: WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 71814, dated 16 December 2005, is hereby AFFIRMED with the following MODIFICATIONS: (1) the amount of ₱660,000.00 as refundable amount of interest is reduced to THREE HUNDRED THIRTY FIVE THOUSAND PESOS (₱335,000.00); (2) the amount of ₱300,000.00 imposed as moral damages is reduced to ONE HUNDRED FIFTY THOUSAND PESOS (₱150,000.00); (3) an interest of 6% per annum is imposed on the ₱335,000.00, on the damages awarded and on the attorney’s fees to be computed from the time of the extra-judicial demand on 3 March 1998 up to the finality of this Decision; and (4) an interest of 12% per annum is also imposed from the finality of this Decision up to its satisfaction. Costs against petitioner.